How MnDOT could help commercial real estate

February 9, 2018

A plan to build a lid over interstates 94 and 35W between the Downtown East and Cedar Riverside neighborhoods in Minneapolis is one way MnDOT can bring value to Minnesota’s commercial real estate market, Transportation Commissioner Charlie Zelle said Thursday.A plan to build a lid over interstates 94 and 35W between the Downtown East and Cedar Riverside neighborhoods in Minneapolis is one way MnDOT can bring value to Minnesota’s commercial real estate market, Transportation Commissioner Charlie Zelle said Thursday. (Staff photo: Bill Klotz)

Minnesota’s 11,000 miles of state highways will need $6 billion in improvements in the next decade if they are to keep up with the needs of the economy, Zelle said Thursday at a Minnesota NAIOP event in St. Louis Park.

Improvements to highways, the state’s public transit systems and its other 129,000 miles of roads are important to drawing economic investment to the state, said Zelle, who heads up the state Department of Transportation.

Without them, Minnesota’s business climate might not seem so attractive.

“It’s a high tax state, but for god’s sake let’s not lose the high value,” Zelle said. “We lose that and we’re really screwed.”

Zelle, the former CEO of the Jefferson Lines bus company in Minneapolis, has been MnDOT’s commissioner for five years, and will finish his tenure when Gov. Mark Dayton leaves office in early 2019. Until then, Zelle wants to stay on course to invest billions of dollars to fix roads and bridges that are “slowly deteriorating.”

He also wants MnDOT to be ready to welcome new types of transportation – including autonomous vehicles and greater use of car services like Uber and Lyft.

Transportation investments are important to persuading businesses to invest in Minnesota real estate, said Phil Cattanach, a senior director of real estate development with the Minnetonka-based Opus Group. He said his clients like Minnesota for its quality of life and its skilled and educated workforce. But they want to see a payoff from the taxes they will face in the state.

“Oftentimes where the narrative tends to get a little trickier in front of the potential client is that your taxes are very challenging,” Cattanach said at the NAIOP event.

Transportation improvements will have the biggest impact in the Twin Cities, Zelle said. The area’s growing population requires safe and reliable transportation to the workplace. And the workplace itself – along with other types of space – could use some of the real estate that roads currently occupy.

Building new, developable land above roads would unlock acres of air space over Interstate 94 and Interstate 35W in Minneapolis, said Mark Savin, an attorney with Minneapolis law firm Fredrikson & Byron. Minneapolis, he said, needs the room to grow.

“Nobody anticipated that downtown would grow to the size it is,” Savin said at the event. “Just the dirt underneath them [I-35W and I-94] is incredibly valuable real estate.”

Several such projects are being designed, Zelle said. They include a 17.8-acre patch over Interstate 94 between the Downtown East and Cedar-Riverside neighborhoods in Minneapolis and the 13-acre Grandview Green plan for space over Highway 100 in Edina (largely between Eden Avenue and 50th Street).

MnDOT’s most recently completed “lid” over a highway is the Target Field Plaza in downtown Minneapolis, Zelle said. MnDOT is open to more.

“I think downtown is a real economic opportunity,” he said.

But Zelle said funding for the state’s transportation future is something that has to be negotiated, particularly at the state Legislature. Legislators from Greater Minnesota may have to “compromise on pavement quality” so that enough money is available to keep people and the economy moving in the metro area, he said.

Fifty-two percent of the money collected for the state’s highway system comes from the seven-county metro area in the form of gas taxes, vehicle license and registration fees, and motor vehicle excise taxes, Zelle said.

The planned 14.5-mile Southwest light rail transit line has seen funding troubles due to a metro-outstate divide at the Capitol. When asked about the project’s future, Zelle said nothing is yet certain.

“There’s a 75 percent chance it will be built,” he said of the $1.86 billion line between downtown Minneapolis and Eden Prairie. “But, boy, this is a beleaguered project.”

Construction of the Southwest line is expected to start this year, according to project’s website.

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